The View From The Winner's Circle

Here's where the repeat all-star fund managers are staking their money in 2004

Five mutual funds are taking top honors again in the Standard & Poor's/ BusinessWeek Excellence in Fund Management Awards, and for good reason. They're a remarkable bunch. They were selected for the award a year ago in part because they got their investors through the bear market with few losses. The Standard & Poor's 500-stock index is up about 41% since, and they've shown they can run with the bulls as well.

What are they saying about 2004?

Legg Mason Value Trust's (LMVTX ) Bill Miller, who in 2003 beat the S&P 500 for the 13th year in a row, remains bullish on the market. He believes many stocks are reasonably priced and some, such as (AMZN ), one of his largest holdings, are bargains. "People worry that Amazon is cutting prices, but in fact they're gaining market share," he says. That is essentially the approach that made Dell (DELL ) one of the superstocks of the 1990s, he adds.

So will Miller, who took his first vacation in years last summer -- a week-long trip to Greece and Turkey -- be able to extend his streak to 14? So far the S&P, up 4% through Mar. 5, has a three-percentage-point edge, but we're reluctant to bet against Miller and co-manager Nancy Dennin, who joined him in 2000.

Growth Fund of America (AGTHX ), another winner last year, is back as the best large-cap growth fund. The team-managed, broker-sold $71 billion fund, offered by American Funds, has a stellar reputation and market-beating performance, gaining nearly 47%.

A review of the fund's portfolio shows heavy bets on semiconductor companies, such as Taiwan Semiconductor Manufacturing (TSM ), as well as a focus on such media giants as Time Warner (TWX ) and Fox Entertainment Group (FOX ). The Los Angeles firm is notoriously press-shy and won't talk about the fund, so we couldn't find out why the cash stake is hovering above 10%. But it's a safe guess that big inflows -- $750 million during 2003 -- had a hand in it.

Stock markets overseas also rallied, which made the last year a winning one for foreign funds. The Julius Baer International Equity Fund, one of last year's honorees, is making big bucks by including emerging-market stocks in its mix. Portfolio manager Rudolph Riad-Younes has stashed more than 20% of the fund in fledgling economies such as Poland, Hungary, and the Czech Republic. "Stocks in these countries are still undervalued relative to the developed world," he says.

Convertible securities are moving in sync with the equity markets, giving a boost to Calamos Growth & Income (CVTRX ), formerly known as Calamos Convertible Growth & Income, which is on our list again. Co-managers John Calamos Sr. and nephew Nick Calamos are stocking the fund with technology issues, such as Cisco Systems (CSCO ), as one way to play the recovery. "We like companies that make other companies more efficient," says John Sr.

Returns aren't expected to be nearly as exciting for more plain-vanilla fixed-income offerings. At the $204 million TCW Galileo Total Return Bond, lead manager Jeffrey Gundlach, another repeat winner, shifted one-third of the portfolio into adjustable-rate mortgages. Although the coupons typically reset in five years, he isn't too worried about climbing interest rates. "Everyone talks about rates going up, but they seem to be stuck at this level," Gundlach says. Making bold bets -- and getting them right -- should keep these funds ahead of the pack in 2004.

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